CFPB commission goes from idea to afterthought

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WASHINGTON — As House Democrats seek to reverse Trump administration efforts to rein in the Consumer Financial Protection Bureau, the industry's hopes of replacing the bureau's single-director leadership structure with a five-member commission are quickly fading, at least in the short term.

Banks and credit unions have stood firm in the belief that too much power is concentrated in the CFPB director's position — regardless of which political party controls the White House — and have continued to push for legislation to create a bipartisan commission to oversee the agency.

A commission, which would provide oversight rather than weaken the bureau's power, has been seen as a potential bargaining chip in future negotiations on financial services bills. But Democratic leaders do not appear interested. The House recently passed the Consumers First Act, which goes in the opposite direction by strengthening agency powers that the administration has tried to restrain.

“There was a feeling that Democrats would come around to wanting a commission when it was in their political interest to do so,” said Brian Gardner, director of Washington research at KBW. “You’d want a commission so you’d at least have representation on a commission when you are out of power. … That never materialized.”

Some analysts say the idea has never really been on the table.

“I don’t think Democrats would ever want to give them a commission,” said Ed Mills, a policy analyst at Raymond James. “What I’ve consistently heard is, ‘We’ll endure years of a bad director out of hopes to get a CFPB director that a Democratic president has appointed.’ ”

While some moderate Democrats have voiced support for a commission, the caucus largely views the single-director structure as necessary to maintain the agency's independence. That is despite criticism of CFPB Director Kathy Kraninger and former acting Director Mick Mulvaney. Republicans, meanwhile, have focused less on a commission proposal while they praise steps taken by Kraninger after years of a heavy enforcement regime under Richard Cordray, an Obama appointee.

“I think that for the industry, we are probably at a high water mark in terms of getting what it wants with Kathy Kraninger as the CFPB director,” Mills said. “She’s there for the next four and a half years, and we are facing a possibility that if Trump wins re-election, he could box out his successor from making a nomination in his or her first term.”

Democrats appear more focused on righting what they see as Mulvaney's wrongs during his leadership of the agency.

Last week, the House passed the Consumers First Act, which was intended to reverse decisions Mulvaney made at the bureau. The bill, which passed entirely along party lines and likely won’t be considered by the Republican-controlled Senate, would limit the number of political appointees the CFPB can hire, restore supervision and enforcement authority in the agency’s fair-lending office, and resume supervision for the Military Lending Act, among other things.

“The title of this piece of legislation says it all. This bill puts consumers first by ensuring the CFPB remains dedicated to its original mission: consumer protection,” Rep. Joyce Beatty, D-Ohio, said in remarks on the House floor.

The industry has not given up hope about a commission. While the Democratic bill was being debated, the Consumer Bankers Association submitted a letter to Congress urging lawmakers to create a bipartisan commission at the agency rather than passing “partisan” legislation.

“We believe that the Consumers First Act would probably not have been needed if a bipartisan commission had been established at the bureau,” Sam Whitfield, senior vice president of congressional affairs at the Consumer Bankers Association, said in an interview. “That would have mitigated a lot of Democrats' concerns.”

Though other industry groups continue to support the creation of a CFPB commission, they recognize that their efforts to advance legislation in both chambers likely won’t succeed in the short term.

“We still support going to a five-member commission,” said Paul Merski, group executive vice president for congressional relations and strategy at the Independent Community Bankers of America. “With the divided Congress, it’s challenging because both sides of the aisle look at a commission differently. When Director Cordray was in there, the commission was viewed as a way to undermine Cordray by the Democrats. Now that you have Kathy Kraninger in there, the commission may be viewed as a way to undermine her for Republicans.”

Credit unions groups share the banks’ position that the CFPB should be restructured into a commission. Ryan Donovan, chief advocacy officer for the Credit Union National Association, said credit unions will continue to push the message that the agency’s current structure is unsustainable for the industry, even if there is little chance of it happening during the current Congress.

“In advocacy, when you are trying to achieve a public policy outcome, you want to always be talking about it,” Donovan said. “If you stop talking about it, the commission will die. … In either five or 10 years, there’s going to be a new director who might be closer to Cordray than Kraninger. That type of uncertainty is unsustainable. You can’t have a situation where the rules change every five years.”

The idea of a CFPB commission structure is seen by some as a middle-of-the-road approach for an agency that many Republicans in Congress would like to see disappear.

Earlier in May, Sen. Ted Cruz, R-Texas, introduced legislation to repeal the CFPB altogether. The bill has seven other Senate Republican co-sponsors.

“Ending the CFPB is viewed as an extreme position,” Mills said. “Putting it as a commission makes it similar to some of the other federal regulators,” such as the Federal Deposit Insurance Corp. and the Securities and Exchange Commission.

“In any commission … the majority will still continue to rule,” Gardner added. “However, that doesn’t mean that the minority doesn’t have a useful role. That is public debate, public discourse, pushing back on ideas, floating new ideas. I think it helps create a check or a break on the majority.”

But even as a commission approach to the agency would give the minority a voice, Mills said, there doesn’t appear to be any urgency to legislate changes to the CFPB's structure.

“We legislate when there is a crisis or a deadline,” Mills said. “There is no crisis or deadline tied to the CFPB from a Republican perspective right now.”

Gardner said Senate Majority Leader Mitch McConnell, R-Ky., likely wouldn't prioritize a bill that would include changes to the CFPB.

"McConnell, generally, will schedule floor time for legislation only if it has 60 votes," Gardner said.

But Whitfield said bipartisan support to create a commission persists.

“I think members on both sides understand that the CFPB can be enhanced and increased transparency and stability brought to the bureau by the addition of a bipartisan commission,” he said.

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Dodd-Frank Regulatory reform Kathy Kraninger Richard Cordray Mick Mulvaney CFPB Consumer Bankers Association ICBA CUNA
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